Louisville to explore residents' appetite for tax, debt in exchange for improvements

$20 million-plus bond measure could appear on future ballot

By John Aguilar For Hometown Weekly

Posted:
01/28/2013 09:47:59 AM MST

Are people living in Louisville willing to vote themselves a tax increase -- or allow the city to incur additional debt -- so that money can be raised to fund much-needed capital improvement projects, like an expanded recreation center, more pedestrian and bike connections and an outdoor aquatics facility?

That will be one of the major topics of discussion at Tuesday's City Council study session, during which city leaders will examine various bonding strategies that could quickly raise $20 million or more to complete items on Louisville's wish list.

"With interest rates so low at this point and construction costs escalating faster than the cost of borrowing money, are the projects the city council would want to pursue worth asking voters for bond funding?" City Manager Malcolm Fleming said. "On the other hand, we don't want to do anything that would have people concerned that we're overextending the city's resources."

Specifically, the city will explore the idea of taking a sales or property tax increase to the voters or simply attempting to float bonds on existing revenue streams that would then be dedicated to particular projects.

To raise $20 million in bond funding, for example, the city estimates the tax on a $100 purchase would go up by 44 cents. The city already has a 3.5 percent sales tax rate. If Louisville instead pursued an increase in the mill levy to raise the $20 million, the owner of a $500,000 home would end up paying an additional $112.57 a year in property tax. A ballot measure could appear on the ballot as soon as this November.

The city would more than likely poll residents to gauge their appetite for a tax hike, Fleming said, especially given the fact that voters passed a 3.5 percent use tax in 2010 and a 10-year extension of an open space sales tax as recently as last November.

"We wouldn't pursue it if there was strong sentiment that they don't want to see taxes raised," he said.

The city also doesn't want to see its businesses at a competitive disadvantage by having excessive sales tax rates, Fleming added.

Historic low interest rates

If the tax-raising route proves unpalatable, the city could still raise money by issuing bonds and paying back bondholders money from untapped revenue streams.

That's the approach Boulder took when it placed a measure on the 2011 ballot that asked voters to approve the issuance of $49 million worth of infrastructure bonds to improve roads, bridges and other public facilities. The measure passed.

Boulder Budget Director Eric Nickell said residents have already started reaping the fruits of that funding, with street overlays making for a smoother ride around the city, the repair of 15 parking lots and plans to build a wildland fire station.

But he said a city or town needs to have a pretty good sense of its overall financial health because issuing bonds without an accompanying tax bump doesn't come without risk.

"If there were to be a downturn in your revenues, you have to continue paying off those bondholders," Nickell said. "For most cities, all of their money is spoken for. Then you would have to cut somewhere else in your operations."

Boulder, he said, saw that it had additional funds to underwrite the $49 million in bonds because the city had just retired an earlier bond issue -- and the interest payments that accompanied it.

"We felt we could maintain our services while we did this," Nickell said.

And the historically low rate the city was able to get on its bonds -- 2.54 percent -- will end up saving the city millions of dollars over the life of the debt compared to what it would have paid just a few years ago and will likely pay again a few years from now.

"It's a great time to do this, just like it's a great time to buy a house," Nickell said.

'Enjoy improvements now'

Joe Stevens, director of parks and recreation for Louisville, said money from a future bond issue could fund improvements at many of the facilities and program areas under his watch. An expansion of the 57,000-square-foot recreation and senior center, an outdoor aquatics facility and improvements to the golf course -- most notably an overhaul of the course's irrigation system -- have been identified as priorities on the city's capital improvements projects list.

"It makes sense to borrow money at today's dollars and enjoy the improvements now," he said.

Stevens said the recreation center is "swamped to death" with both Louisville and Superior residents using it. Expanding the 23-year-old facility to 85,000 or 90,000 square feet is what's needed, he said. And better facilities for the divers and swimmers in the city are needed as well. The new required depth for high school divers was just increased to 12 feet, Stevens said, and Louisville's dive pool is 10 feet deep.

"The aquatic community has long brought to our attention the need for better facilities," he said.

Fleming agrees that today's unique intersection of circumstances -- extremely low interest rates and rising construction costs -- makes it an opportune time to at least broach the topic and get the conversation going.

"It's this confluence of events that, combined, makes it a good time to have the discussion," he said.